Chart of the Week
Having reached heights of over €300/MWh in August 2022, European month-ahead gas prices tumbled back to their pre-crisis level of just €23/MWh at the end of May. However, prices have been rising in recent weeks and briefly exceeded €40/MWh on 15 June.
OUR ANALYSIS
The tumble since last summer was driven by the mild weather in winter 2022–23 reducing gas demand in Europe. In parallel, gas storage levels have been rising at a healthy rate since the end of March despite low Russian gas flows to Western Europe. EU capacity was 75% full on 20 June compared with 55% at the same time last year1.
Several reasons explain the price rise since the beginning of June. First, a maintenance outage at a Norwegian processing plant until 15 July is currently cutting capacity by 80 million cubic metres (mcm) per day. Second, Chinese imports of liquefied natural gas (LNG) ticked up sharply in May, consuming a higher share of global supply. Third, intense fighting in Ukraine is putting extra pressure on commodities, including grains – there is now little hope that the Black Sea Grain Initiative will be extended beyond mid-July.
Rising gas prices are a reminder that Europe has not fully resolved its energy crisis, although the situation appears to be under control for next winter. Fears over supplies and winter shortages are currently quite low, which should ease pressure on the gas market until the end of the year.
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Written on June 23, 2023. This is not an investment advice. Opinions subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/sp-500-anatomy-of-the-year-to-date-rise/
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